Insurance programs to test prairie farmers

Farmers in the eastern half of the Prairies will have two really awful jobs this summer:

  • Cleaning up weed-infested and flood ravaged fields.
  • Applying for various types of crop and income insurance.

The latter will probably be the more excruciating part, especially for farmers who have built-in, structural risk management in their operations.

For the last couple of weeks, farmers have been speculating about what the flooding and saturation will mean for their crops and livestock, and also trying to figure out what it will do to their incomes.

That brings up myriad forms of insurance, many of them involved in compensating farmers for damage.

Farmers who haven’t been able to seed at all will make unseeded acreage claims.

Those who seeded crops, but saw them badly damaged or destroyed by excess water, will make crop insurance claims.

Those who see their income suffer significantly because of the situation will make safety net claims.

But as I’ve heard from farmers in the last two weeks, the structure of many programs means that most farmers will get little or nothing. Most programs have deductibles, percentage coverage limits or averaging functions that require farmers to be effectively devastated in order to collect.

A small number may get a lot from insurance programs depending on how their farm is structured.

It’s frustrating, but farmers with well-balanced, diversified operations are less likely to get payments.

If a farm has land spread over a few kilometres and only portions of fields are badly affected by excess moisture, averaging will kill most of a potential crop insurance or general revenue insurance claim.

If a farm has both crops and livestock and the livestock are OK, general revenue insurance programs will likely not pay off either, since livestock bring good money today.

For farmers with riskier operations, like grain farms with all their land in a tiny, contiguous, vulnerable area or entirely committed to one commodity, some insurance programs could work out nicely.

This reality annoys several farmers I spoke with at the recent Keystone Agricultural Producers meeting and elsewhere.

They feel penalized because they haven’t put all their eggs in one basket.

With recent cuts to AgriStability coverage, some farmers could receive much less than they got just a few years ago, after the last flood.

Most farmers don’t want to farm the insurance and safety net system. They prefer to be able to farm the land and are frustrated that insurance programs hardly seem to kick in unless the apocalypse occurs.

Many have designed their farms so they are less vulnerable to these sorts of weather disasters.

It seems unfair to find that prudence disqualifies some farmers from getting support they thought they were entitled to.

But maybe there’s a more cheery, optimistic way to look at this. Farmers might feel ripped off by insurance program designs but at least they aren’t reliant on those programs. They’ve learned to live mostly without them.

They won’t be shocked when their claims bring little. One farmer I spoke with last week said he thinks he will receive $200,000 less than he did in 2011, mostly due to changes in program design.

The one thing worse this year than being a farmer who knows he’s going to get little from production and revenue insurance programs is being a farmer who desperately needs a good payout to survive and doesn’t know if he’s going to get one.

A well-diversified production base allows farmers to have the most important thing that insurance can provide anyway: peace of mind.

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